The events of the past few years have prompted many of us to reevaluate our priorities as we rethink fundamental aspects of our lives. And according to the 2022 Northwestern Mutual Great Realization survey, 20 percent of people who say they plan make major life changes over the next two years cite moving to a new city or state as a top life goal they intend to pursue in the coming year.
of people planning to make a major life change say they intend to move a new city or state in the coming year.
When you’re considering relocating, you may be drawn to a new place for its scenic and cultural attractions or even just its weather. While you can likely find ways to save on the actual moving costs, there may be some other financial factors you might not have considered. Here are five cost-related questions to research if you’re contemplating a move.
Questions to research if you’re contemplating a move
1. How much will your housing costs be?
Housing is the cost that probably fluctuates the most when comparing areas. If you’re already in a high-cost region, you might be pleasantly surprised by the degree to which you can potentially upgrade your living situation.
Many websites are set up to help you compare real estate costs, which can be helpful. But for a more accurate idea of what a mortgage payment or rent would be, it’s best to scroll through actual listings for real-time data on pricing and availability in your preferred communities.
For the best “inside” information, you may want to talk to a real estate agent who’s embedded in the local area. Ask friends and family if they know someone or ask a trusted local agent to connect you with someone near your desired location who could help steer you to the neighborhoods that might be the best fit for your lifestyle.
2. How will your taxes be affected?
Every state assesses their taxes a bit differently, which can lead to a significant variance in your tax liability. For example, some states levy a stiff income or sales tax whereas others have hefty property taxes.
The Tax Foundation offers a variety of charts that can help you with your analysis but note that it can be tricky to compare apples to oranges. Some states levy property taxes on a house’s fair market value while others look at assessed value. Others have restrictions that limit how much property taxes can rise in a year. In addition, counties or cities might also have additional taxes that aid school boards, emergency services and utility districts, which further boost your bill in select regions. Taking the time to research the state you’re interested in can help you estimate how your tax burden could change — and avoid being surprised by your paycheck deductions.
You’ll also want to check into how you’ll be taxed if you live in one state, but your employer is based in another. Many states have reciprocal agreements with neighboring states. In others, you might need to file a resident tax return and a nonresident tax return — but in most cases you’ll get a credit in your home state for the taxes you paid to the work state. A tax professional can help you navigate your specific situation.
3. What are the daily cost-of-living differences?
Before moving to a new city or town, one of the most important things to consider is how much it will cost to live there. If you can’t visit the area in person, a good way to compare costs is by using a cost-of-living calculator. There are several types you can find online that can give you an approximation on the costs of housing, food and entertainment.
Transportation is a big budget item for most people. If you aren’t leaving the state, call your current insurance carrier and ask whether you can expect your rates to change when you've moved. But if you're moving to another state, you might need a new insurance carrier altogether as car insurance rates, policies and coverage requirements do vary from state to state.
You can also look into a cost-of-living index to compare how much it costs in one area compared to another. Though the U.S. government doesn’t publish an official cost of living index, several organizations maintain their own in different regions of the country, which can help you to directly compare what it costs to live in one area against another.
4. Will your medical costs change?
Health care costs and options can vary widely from state to state. If your job provides health insurance, read through your policy to figure out your deductible and what’s covered. Even if you don’t need to change insurance companies, you’ll need to find a new pharmacy and new doctors — local providers that are covered by your employer’s health insurance plan. You don’t want to be surprised by having to routinely use an out-of-network practitioner because no one else is convenient.
If you’re self-employed, you’ll need to report your move to the health insurance marketplace at healthcare.gov and search for options in your new state. If you need assistance, you can contact an insurance agent through the website or by calling.
5. Do you need to adjust your investment portfolio?
A few types of investments can have unexpected tax consequences when you move. For example, if you’re invested in your current state’s 529 plan to save for your child’s education, you may be enjoying a tax deduction that won’t be available in your new location. If that’s the case, you’ll want to check out your new state’s plan to see if it offers similar perks if you switch. Keep in mind that you’ll also need to research any disparities in fees and performance.
Every state also has its own capital gains tax rates, which could also impact your investment strategy. For example, if you own municipal bonds and they are tax exempt in the state where you live now, that might not be the case if you move to a different state.
It’s a good idea to talk to a financial advisor who can help you navigate these and other elements of your financial plan that could be affected by a move out of state.
This publication is not intended as legal or tax advice. This information is intended solely for the information and education of Northwestern Mutual financial representatives, their customers, and the legal and tax advisors with whom they work. It must not be used as a basis for legal or tax advice and is not intended to be used and cannot be used to avoid any penalties that may be imposed on a taxpayer.